EU antitrust law plays a key role in the field of intellectual
property licensing agreements which have an impact on the EU
territory. This is oftentimes ignored by the parties to these
agreements, in particular if they are non- European companies. For
two reasons such ignorance is risky: in the first place, EU
antitrust law is compulsory law which cannot be circumvented by
choice of law provisions. In addition, every violation of EU
antitrust law can have severe consequences, i.e. invalidity of the
agreement in part or in total, administrative fines (up to 10% of
the yearly turnover) and potential damage claims of third parties
who are affected by the antitrust violation.

On March 28, 2014, the European Commission adopted a revised set
of rules for the assessment of license agreements under EU
antitrust law. This revised set of rules replaces and sharpens the
current set of rules, namely EU Regulation 772/2004 and the
corresponding Guidelines 2004C101/2.

The revised set of rules consists of

Commission Regulation (EU) No 316/2014 on the application of
Article 101 (3) of the Treaty of the Functioning of the European
Union to categories of technology transfer agreements
('TT-BER'); and

Commission Guidelines (2014/ C89/03) on the application of
Article 101 (3) of the Treaty of the Functioning of the European
Union to of Technology Transfer Agreements
('Guidelines').

The effective date of these new rules is 1 May 2014. It is
noteworthy that the new rules not only apply to license agreements
entered into from 1 May 2014 onwards, but – as of 1 May 2015
– also to agreements entered into under the regime of the
current rules. In other words, the parties to existing license
agreements have one year to ensure that their agreements are in
conformity with the new rules. As well be detailed below, there is
some homework to be done.

II. The legal context

The starting point for the legal analysis of a license agreement
under EU antitrust law is Article 101 of the Treaty on the
Functioning of the European Union ('TFEU').

Article 101 (1) TFEU prohibits agreements which may affect trade
between EU Member States and which have as their object or effect
the prevention, restriction or distortion of competition within the
EU market. Therefore, it is for instance prohibited if two
competitors in a license agreement divide markets between them
instead of competing with each other. Another example would be a
license agreement that forces a licensee to pay royalties for EU
countries in which no intellectual property rights of the licensor
exist.

Article 101 (3) TFEU provides for an exemption to this
prohibition under Article 101 (1) TFEU if four exemption
requirements are met. In practice, these four exemption
requirements set a high hurdle and produce legal insecurity. The
importance of the TTBER lies in the fact that it creates a
'safe harbor' for license agreements if these agreements
respect the conditions provided in the TT-BER. In this case it is
assumed that these agreements are in conformity with Article 101
(3) TFEU. Thus, every license agreement should make sure that it is
covered by the 'safe harbor' of the TT-BER. Otherwise, at
least the validity of the license could be at stake.

III. What changes?

The new regime contains in particular the following important
changes to the TT-BER and to the Guidelines:

1. Important changes to the TTBER

a) Non-challenge clauses

Many license agreements contain clauses that obligate the
licensee not to challenge the validity of the licensed intellectual
property rights during the lifetime of the license agreement. Under
the new regime, in non-exclusive license agreements these clauses
are now considered as an 'excluded restriction' pursuant to
Article 5 TTBER. Consequently, these clauses are no longer
automatically exempted from Article 101 (1) TFEU. Now, it must be
analyzed on a case-by-case basis if these clauses fall under
Article 101 (1) TFEU and if so, whether they meet the high hurdles
set by the four exemption requirements of Article 101 (3) TFEU.

b) Grant back obligations

In addition, the new regime takes a more prudent approach on
clauses that force a licensee to exclusively license or assign to
the licensor any improvements or new applications conceived by the
licensee with respect to the licensed technology. Under the new
regime, these clauses are now also considered as an 'excluded
restriction' pursuant to Article 5 TT-BER (with the
consequences described above for nonchallenge clauses in
non-exclusive license agreements).

2. Important changes to the Guidelines

a) Settlements

In the Guidelines it is now explicitly stated that licensing in
the context of settlement agreements is treated in the same way as
other license agreements (cf. margin no. 237). Of course, the
Guidelines are theoretically without prejudice to the
interpretation of Article 101 TFEU and the TT-BER that may be given
by the EU courts and the national courts. Nevertheless, in
practice, it is most unlikely that these courts would disregard the
Guidelines.

b) Technology Pools

In addition, the Guidelines give new guidance on
"technology pools", i.e. arrangements in which two and
more companies assemble a package of technology which is
subsequently licensed to the members of the pool and third parties.
The Guidelines acknowledge the often pro-competitive nature of
patent pools (in particular in the telecom sector) and offer now a
'safe harbor' for these pools under the conditions set
forth in margin no. 244 et seq. of the Guidelines.

IV. Practical impact

The new regime has a real practical impact, since most license
agreements contain non-challenge clauses and/or grant-back
obligations. It is definitely recommendable to avoid for new
licenses any non-challenge clauses or grant-back obligations which
conflict with the new regime. Otherwise, the validity of these
licenses would be prejudiced. Given the fact that, as of 1 May
2015, the new regime will also apply to license agreements existing
today, it is furthermore advisable to make sure between the
contracting parties in the upcoming months that any conflicting
obligations are removed from the existing agreements. In a
nutshell, every license with an impact on the territory of the EU
should make sure that it is covered by the 'safe harbor' of
the TT-BER.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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